Reforms needed to improve ranking in Ease of Doing Business index

Ferdaus Ara Begum | Published: February 23, 2019 21:53:14 | Updated: February 23, 2019 22:01:37


The World Bank will publish Doing Business 2019 report after research work for the study is completed by April 2019. Bangladesh got disappointing ranking in the Doing Business 2018 index. The government and related stakeholders have been working hard to improve the country's ranking in the next edition of Doing Business report. Bangladesh Investment Development Authority (BIDA) is the coordinating organisation for the purpose; its supported by relevant ministries. Recently a committee has been formed in the Ministry of Commerce to deal with four specific indicators about which the Ministry has concerns. Bangladesh Bank is also working on some specific issues of trading across borders and initiatives are underway to reduce documentation requirements for export.

But preparations so far are not adequate. At least some important reforms in regard to reduction in time taken for procedures to be completed and associated cost of doing business need to be accomplished to show some improvement. If the reforms can be implemented before April, only then Bangladesh can gain a better ranking in the upcoming Doing Business indext.

INDIAN EXPERIENCE: On January 03, 2019, Business Initiative Leading Development (BUILD) organised a dialogue in a bid to get some ideas from India's experience and measures it had taken that led to their tremendous improvement in ranking of Doing Business from 100 to 77 in 2019. They had implemented reforms in six out of eight fields last year. From the discussion in the dialogue, it became evident that Bangladesh has not been able to prioritise its reform programmes in order to improve its ranking.

Questions were raised about the methodology of doing business index. How can such a huge number of countries can be judged under a single set of indicators as the context and development nature and priorities are different from one country to another? Views were expressed that whatever be the specific scope of the methodology of doing business, there should be no hesitation to use this as a starting point for promoting better business and investment in the country. Vietnam has excellent infrastructure, better policy regime, and stronger skill base. Bangladesh also needs such a package of reforms. Linking reforms with national development vision is critical for projecting the agenda of change. Coordination needs to be strengthened across the government. Creating taskforces for an inclusive institutional framework for attaining specific objectives is also necessary.

Ultimately, business reforms can create jobs and increase income leading to improvement in the quality of life of general people. Transformation of the economy from labour-based to knowledge-based and thus creating a better image of the country so that investors feel free to invest should be the goal.

Investment promotion and facilitation is a government-wide agenda. Accountability is another important issue, with very specific targets to reduce time, cost and procedure for business. Feedback and communication from users is essential so that reforms are not implemented merely on paper, speakers at the dialogue pointed out.

As far as steps required to improve the ease of Doing Business are concerned, India implemented 20 reforms over the last four years at the central level and 7,758 reform actions were implemented by the states in FY 2017-18. The state-level reforms are not directly related to Cost of Doing business. But these have helped to improve the macro-level investment environment.

The discussants also mentioned that doing business is a complex issue as it requires cooperation from cross-sectoral stakeholders. India and Bangladesh have certain striking similarities. The business reform agenda of both countries are linked with national development visions where inter-ministerial coordination is important. It takes time to drive change in doing business, and in Bangladesh the drive began properly in 2018 which should translate into incremental success.

There are also areas where Bangladesh needs distinct contextualisation. In Bangladesh, the strong vision to bring about reforms for improving the business environment in the country from the leadership at the top has not evenly percolated to different line ministries. As a result the line ministries cannot help BIDA's reform initiatives promptly. India created indicator-specific task forces which worked as institutional mechanism for targeted and timely delivery of change. These are still lacking in Bangladesh.

All reforms cannot be reflected in doing business as it operates on a common methodology for 190 countries, rather doing business works as an entry point to reforms. Broader economic business reform is required beyond ranking improvement to affect both small and large businesses so that the environment is facilitated followed by greater ease of doing business. 

The government of India focused on empowering government ministries, departments, and institutions so that they implement reform programmes by themselves. Besides, the establishment of Department for Industrial Policy & Promotions (DIPP), similar to the Ministry of Industries in Bangladesh, to coordinate efforts among different departments during the reforms has been a significant catalyst. So along with the top-level commitment of the country, the initiatives and efficiency from the institutions were also very important in India's reform journey.

Employees of the government who deliver services are the main architects. As such, they need to understand and identify the areas of improvement as per methodology of calculating cost of doing business report under certain indicators and achievable targets. Additionally, the mindset of government officials need to be changed in order to realise that Cost of Doing Business report is prepared with responses from private sector alone and public sector is not involved in this exercise. So stakeholder feedback for identifying critical implementation gaps remains an important area. 

Online submission and online payment system also need to be functional in an effective way for different government departments so that, businesses can receive actual benefits from the reforms. Doing Business report cannot identify many important regulatory and policy barriers which also impact businesses. The  Department for Promotion of Industry and Internal Trade (DPIIT), formerly Department of Industrial Policy and Promotion (DIPP), of India issues business reform action plans every year and sends these to all 29 states and seven union territories for implementation. At the end of the process, states and territories are ranked based on their reforms.

It transpired from discussion that: support and commitment from the top; an empowered and strong reform coordinator; clear instructions and information on what reforms should be implemented; clear targets and parameters for success; constant communication with reform coordinators; constant dialogue with private sector and users; training of users and front-line officers; knowledge and lessons from what others are doing etc. facilitated India's business reforms.

BANGLADESH INITIATIVES: Bangladesh Bank (BB) is trying to simplify export documentation processes. Currently Bangladesh has 14 steps whereas India, Vietnam and New Zealand have only six. The three countries have automated certificate of origin and technical standards certificate. They also do not need cargo release order, customs transit document, foreign exchange authorisation, pre-shipment inspection-clean report findings, utilisation declaration or utilisation permission and letter of credit. Bangladesh uses EXP Form for customs declaration purposes. To reduce the time, cost and procedure of trade across borders, it is planning to eliminate EXP Form. A meeting was recently held to find the best alternative way to implement the decision of eliminating EXP form with existing capacity.

Private sector stakeholders think that after eliminating EXP Form, the invoice of the main export document can be used for the same purposes. But the invoice lacks self declaration of exporter.  Any last-minute changes in the export volume cannot be captured by the invoice. Moreover, there will be no monitoring either from Authorised Dealers (AD) or BB. 

The online platform for EXP Form developed by BB is currently shared by commercial banks. It is suggested by HSBC and Standard Chartered Bank that the online platform can be opened for exporters by giving them login id and password. IT analysts from BB shared that it is possible but they might need some inputs to open the platform to exporters. This suggested system will reduce time and cost of export. But the private sector finds it complicated. Moreover, some research is needed to determine that such a platform will not create any threats against the export sector of the country.

Bangladesh has been able to make VAT registration fully online. Similarly, trade license application can be made online. This can significantly improve the ease of doing business in the country. Bangladesh is also in the process of finalising its Companies Act, which can play an important role.

Indicator-specific task forces with an inclusive institutional framework can be formed under the supervision of an empowered independent authority for business reforms. Yearly Reform Implementation Action Plan (RIAP), along with monitoring the implementation target, can create a competitive attitude among ministries/departments. 'Reform Champions' can be awarded for their better service deliveries. Capacity building of relevant public officials and private stakeholders, especially in respect to methodological aspects, need to be ensured. They should be provided training to handle issues attached with doing business issues.

Instant feedback and communication mechanism from users about already implemented reforms and their impact on business need to be established and for this, social media can play a role.

Extensive consultation sessions and public-private dialogues on specific indicators of Ease of Doing Business report can be organised. Coordination needs to be strengthened across the different ministries and departments within the government. In order to develop the capacities of the private sector and support national efforts at the same time, coordination mechanism framework should also be planned.

Ferdaus Ara Begum is Chief Executive Officer of Business Initiative Leading Development (BUILD).

ceo@buildbd.org

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